With unemployment finally starting to ease after years of what was often described as a “jobless” economic recovery, there’s some concern that globalization, by keeping a lid on U.S. wages, will derail the recovery’s momentum.

Usually when the jobless rate declines, wages start to inch up as employers compete for workers. When the Federal Reserve starts seeing wages grow, it will pull in the reins and start raising short-term interest rates.

“The Fed’s job is to lean against too-rapid job growth, because in all modern economic cycles employers began to compete for employees by paying higher wages, ultimately producing inflation,” Inman News columnist Lou Barnes explains. “The optimists are out of their minds today, cheering the health of the economy, but the income/unemployment disconnect is without precedent — although it does connect to a different view of the world.”

Without wage growth, the deflationary environment we’re in today could put a chill on home sales, Barnes and other knowledgeable observers fret. It might be too early in the recovery to get worked up about the lack of wage growth so far, economist Tim Duy writes on his blog, Fed Watch.

Past experience suggests not to expect “significant wage growth” until we move “well below” 6 percent unemployment, Duy says.

With unemployment still falling toward that level, “it is premature to believe that there has been a breakdown in this relationship” between unemployment and the rate of wage growth, Duy writes. “So far, the response of wages is exactly what you should have expected in light of the 1980s dynamics.” Source: economistsview.typepad.com/timduy/.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription